Petroleum futures were seeing modest strength in the overnight session on Tuesday, following losses of three percent and higher in the previous session, amid further weakness in the US dollar index, strength in European shares, and tensions in Iraq, despite losses in US stock market index futures and the start of indirect US-Iranian talks.
Indirect talks between the US and Iran are set to take place in Vienna today, with European officials likely to act as intermediaries in an attempt to revive the P5+1 nuclear agreement from 2015, formally called the Joint Comprehensive Plan of Action (JCPOA). The US delegation will be led by US Special Envoy for Iran Rob Malley. Goldman Sachs stated today that it does not expect increased Iranian oil exports to come as an “exogenous” shock to the oil market, and does not see a full recovery in Iranian exports before next summer. In other OPEC-related news this morning, Reuters reports that dozens of protesters, unemployed university graduates, have once again blocked the entrance to the Nassiriya refinery in southern Iraq. The strike has now lasted five days, and has caused fuel shortages in Dhi Qar province.
Asian shares fell overnight following mixed economic data. Japanese household spending contracted 6.6% year-on-year in February, worse than the 5.3% expected drop, and the Nikkei took a 1.30% tumble. Shanghai shares fared better, edging down 0.04%, following release of the Caixin China Composite PMI, which rose from 51.7 to 53.1 last month – indicating the economy picked up the pace of expansion. The Services PMI jumped from 51.5 to 54.3. The Hang Seng rallied 1.97%. As of this writing, European shares were strengthening, with the FTSE 100 up 1.2%, the DAX having strengthened 1.1%, and the CAC 40 trading 0.6% higher. US stock market index futures were in the red, however, with Dow futures off 0.1% and futures for both the Nasdaq and the S&P 500 down 0.2%. Whereas this was unsupportive for crude, a 0.31% dip in the US dollar index was supportive. Market participants looked ahead to the US Job Openings and Labor Turnover Survey (JOLTS) for February for further direction, expected to show 6.850m job openings, down from 6.917m in January.
The complex sold off yesterday, despite strength in US and European shares and weakness in the US dollar, perhaps as the market more carefully considered the large planned OPEC+ output increases for the May through July period. Brent crude fell $2.71 to $62.15/bbl and WTI dropped $2.80, settling at $58.65/bbl. Losses on the product end of the barrel were smaller in percentage terms, meaning crack spreads narrowed. RBOB futures fell 6.12 cents to $1.9611/g, and ULSD (HO) futures dropped 5.92 cents to settle at $1.7724/g. At New York Harbor, ULSD and ULSHO barge price differentials to NYMEX strengthened by 50 points each yesterday, according to Platts, to -0.15c/g and -14.75c/g, respectively. The HSHO differential held steady at -25.10c/g. April propane price were mixed yesterday, with the north-south spread widening further, according to Platts data. Mt. Belvieu non-LST prices climbed 1.500 cents higher to 98.750c/g and LST prices strengthened 62.5 points to 96.125c/g, while Conway prices fell back 3.000 cents to 81.750c/g.
Natural gas futures fell 12.8 cents yesterday, settling at $2.511/mmBtu amid moderation in the temperature outlook. As of this morning, the latest ECMWF 1-5 day outlook calls over well-above-normal temperatures in the Midwest and the Northeast. The 6-10 day forecast sees mixed temperatures in the Midwest, but continued above-normal temperatures on the East Coast.
